Divorce has a lot of adverse effects, and most affect your personal life. But if you are the owner of a business, it could also have a deleterious effect on your company.
If you want to avoid just that, below are some ways you can protect your company and yourself in the event of divorce.
Sign a prenup or post-nuptial agreement that addresses your business
This is especially vital in a community property state like California. With no valid agreement in place detailing how co-owners of the business will buy or sell their interests, you can face long and costly legal battles. During the pendency of the divorce proceedings, your business prospects can dry up like a canyon creek.
Also important are buy-sell agreements that lay out a plan for how the business will be handled if the partnership (or marriage) goes south.
Hire an independent firm to valuate your business
In most cases, there is no need for both parties in a divorce to retain their own business valuators. These services are expensive — $10,000 to $25,000 — but necessary, and as long as you choose someone with no stake in the matter, you can save a lot of money by hiring a single firm.
Be prepared to buy out your spouse or sell your interest
Divorced spouses who can continue to run a business together are almost like unicorns. They may exist, but nobody seems to know of any. While you and your spouse could prove to be these unicorns, it’s not likely.
Remember, too, that you can use company stock or debt to offset some assets. Alternatively, cede your interest in the family home, 401k or other valuable marital assets to retain sole ownership of your company.
Your Orange County family law attorney can provide additional guidance as you work through the process of divorce.